June 25, 2014

Flawed Dutch government study on ISDS

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Today the Dutch government published “The Impact of Investor-State Dispute Settlement (ISDS) in the TTIP“. The Parliament had asked for this study. The study is flawed.

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Update: See also the Vrijschrift noteShortcomings in dutch government study on investor – state arbitration“, which is more elaborate and more recent.

Vrijschrift letter to Dutch Parlament (Dutch)

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A first reading reveals:

It does not mention that it is near impossible to withdraw from trade agreements. Any mistake in the ISDS procedure in a trade agreement will be as good as impossible to solve.

It does not mention ISDS lacks conventional institutional safeguards for independence: tenure, prohibitions on outside remuneration by the arbitrator and neutral appointment of arbitrators.

It does not mention that the for-profit system creates perverse incentives: accepting frivolous cases, letting cases drag on, letting the only party that can initiate cases win to stimulate more cases, pleasing the officials who can appoint arbitrators.

It does not mention that the system does not observe the separation of powers. The US appoints the president of the World Bank. This president (1) is ex officio chairman of the International Centre for Settlement of Investment Disputes (ICSID) Administrative Council, (2) proposes the ICSID secretary-general, (3) appoints all three the arbitrators in appeal cases under ICSID rules. The secretary-general of ICSID (1) appoints the third arbitrator if the parties can not agree on the third one, (2) will decide on conflicts of interest. (ICSID, articles 5, 10, 38, 52 and Commission, 2014b, Table 8, article x-25.10) In sum, the system is rigged to the advantage of the US.

It does discuss the ICSID appeal procedure, referring to various articles, but does not mention the president of the World Bank’s role noted above.

It mentions the Loewen case in which the US court took a terrible decision, mentions that the US won the ISDS case on a technicality, but does not mention that the US pressured an arbitrator – while that had been discussed in a meeting at the ministry.

The system is rigged to the advantage of the US, and the US is not shy to pressure arbitrators. The US never lost an ISDS case. We can not expect Dutch companies to win major ISDS cases against the US. The study does not mention this.

It does not mention a study that finds that claimants from the US were 91% more likely to benefit from an expansive resolution than claimants from all other states combined.

It does not mention that for-profit arbitrators will be able to review decisions of the European Court of Human Rights.

It does not mention the MFN loophole.

It does not mention that the filter mechanism creates a perverse incentive.

It does not mention investor rights trump human rights.

It does not mention that the legitimate expectations clause could function as a non obvious umbrella clause.

It does not mention that the commission’s ISDS proposals are fundamentally incompatible with Europe’s human rights system.

It does not mention that a system rigged to the advantage of the US is a serious threat to the EU’s privacy protection.

It does not observe that “binding interpretations” are not binding.